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Case Law Details

Case Name : Eswara Reddy Kolli Vs DCIT (ITAT Chennai)
Appeal Number : ITA No.: 2326/Chny/2018
Date of Judgement/Order : 12/04/2023
Related Assessment Year : 2014-15

Eswara Reddy Kolli Vs DCIT (ITAT Chennai)

ITAT Chennai held that addition u/s 69 towards unexplained money sustained on failure to explain the source of the cash deposits with necessary evidences.

Facts- The case of the assessee has been selected for limited scrutiny to verify large cash deposits in savings bank account. During the course of assessment proceedings, as per AIR information the assessee has made cash deposits of Rs. 95,51,000/- in three bank accounts maintained with IDBI Bank Limited, Ongole and two accounts with Axis Bank Limited, Ongole.

Assessee submitted that, he is partner in a firm which is engaged in selling seeds to farmers and the source of cash deposits found in three bank account at Ongole is the amount received from debtors of M/s. Golden Marine Harvest towards collection of sale proceeds of seeds. The assessee had also filed a letter from M/s. Golden Marine Harvest and claimed that the firm has authorized the assessee to receive advance from the debtors.

AO, rejected arguments of the assessee and made additions towards cash deposits amounting to Rs. 95,51,000/- as unexplained money u/s. 69 of the Income-tax Act, 1961.

Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). CIT(A) opined that the assessee could not file any evidence to substantiate his claim that source for cash deposits found in three bank accounts at Ongole, is out of money received from debtors of partnership firm. As regards, agricultural income claim, the CIT(A) observed that the assessee could not file any evidence, including details of land holding and amount of agricultural income generated from land owned by family members of assessee. Therefore, rejected arguments and sustained additions made towards cash deposits. Aggrieved by the CIT(A) order, the assessee is in appeal before us.

Conclusion- We are of the considered view that the claim of the assessee that source for cash deposits found in three bank accounts is out of amount received from debtors of partnership firm is unsubstantiated and thus, we reject argument of the assessee.

In absence of any evidences like details of land holding, type of crop grown and amount of agricultural income generated, it is difficult to accept the assessee’s explanation that source for cash deposits is accumulated agricultural income from family members and thus, we reject arguments of the assessee on this ground also.

Held that the assessee could not satisfactorily explain source for cash deposits found in three bank accounts with necessary evidences. The ld. CIT(A), after considering relevant submissions has rightly sustained additions made towards cash deposits as unexplained money u/s. 69 of the Act.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), Puducherry, dated 31.05.2018 and pertains to assessment year 2014-15.

2. The assessee has raised the following grounds of appeal:

“1. The order of The Commissioner of Income Tax (Appeals), Puducherry dated 31.05.2018 in I.T.A.No.218/CIT(A)-PDY/2016-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.

2. The CIT (Appeals) erred in sustaining the addition of Rs.95,51,000/representing cash deposits in the bank accounts of the Appellant on the application of section 69 of the Act in the computation of taxable total income without assigning proper reasons and justification.

3. The CIT (Appeals) failed to appreciate that the provisions of section 69 of the Act was wrongly applied to the facts of the case and ought to have appreciated that the realization of debtors of the partnership firm, M/s Golden Marine Harvest and agricultural income earned would constitute the source for the cash deposits, thereby vitiating the mechanical application of section 69 of the Act to make the addition in the computation of taxable total income.

4. The CIT (Appeals) failed to appreciate that the details/documents furnished in support of the stand taken while explaining the source for the cash deposits were not properly examined and ought to have appreciated that the analysis of the documents/details filed with reference to the relevant bank statements was completely misdirected, thereby vitiating the related findings.

5. The CIT (Appeals) went wrong in recording the findings in this regard in para 5.3 & para 5.4 of the impugned order without assigning proper reasons and justification.

6. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.

7. The Appellant craves leave to file additional grounds/arguments at the time of hearing.”

3. The brief facts of the case are that, the assessee is a partner of a firm M/s. Golden Marine Harvest, Marakkanam, filed his return of income for the assessment year 2014-15 on 03.01.2015, admitting a total income of Rs. 11,62,320/-. The case has been selected for limited scrutiny to verify large cash deposits in savings bank account. During the course of assessment proceedings, as per AIR information the assessee has made cash deposits of Rs. 95,51,000/- in three bank accounts maintained with IDBI Bank Limited, Ongole and two accounts with Axis Bank Limited, Ongole. The AO, called upon the assessee to file necessary evidences to prove nature and source for credit found in bank account. In response, the assessee submitted that, he is partner in a firm which is engaged in selling seeds to farmers and the source of cash deposits found in three bank account at Ongole is the amount received from debtors of M/s. Golden Marine Harvest towards collection of sale proceeds of seeds. The assessee further contended that, his family members owned 9 acres of agricultural land at Musunur and Pedaparimi Villages, Pragasam District, Andhra Pradesh, and average agricultural income per annum is around Rs. 10,00,000/- and source for cash deposits is out of past agricultural income accumulated for several years. The assessee had also filed a letter from M/s. Golden Marine Harvest and claimed that the firm has authorized the assessee to receive advance from the debtors.

4. The AO, however was not convinced with the explanation furnished by the assessee and according to the AO, although the assessee claims to have received amount on behalf of the partnership firm, but could not file any evidence to prove that the money collected from debtors has been passed on to the partnership firm with ledger extract of relevant parties in the books of the partnership firm. Further, in support of claim of agricultural income, no documentary evidence was produced. Even in his return of income, the assessee did not declare any agricultural income in the past and for the impugned assessment year. Therefore, rejected arguments of the assessee and made additions towards cash deposits amounting to Rs. 95,51,000/- as unexplained money u/s. 69 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).

5. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has reiterated his arguments made before the AO and contended that source for cash deposits found in bank account is collection of money from debtors of partnership firm and also accumulated savings from agricultural income of family owned properties. The ld. CIT(A), after considering necessary submissions of the assessee observed that, the assessee could not file any evidence including ledger extract of debtors in the books of partnership firm to prove that money collected from debtors of firm has been paid to partnership firm. The assessee had also not filed any evidence including relevant bank statements of partnership firm to prove that said money has been routed back to the books of the firm. Therefore, the CIT(A) opined that the assessee could not file any evidence to substantiate his claim that source for cash deposits found in three bank accounts at Ongole, is out of money received from debtors of partnership firm. As regards, agricultural income claim, the CIT(A) observed that the assessee could not file any evidence, including details of land holding and amount of agricultural income generated from land owned by family members of assessee. Therefore, rejected arguments and sustained additions made towards cash deposits. Aggrieved by the CIT(A) order, the assessee is in appeal before us.

6. The ld. Counsel for the assessee, submitted that the ld. CIT(A) erred in sustaining additions of Rs. 95,51,000/- in respect of cash deposits in three bank accounts of the appellant, ignoring explanation furnished by the assessee that source for cash deposits is out of amount received from debtors of partnership firm. The ld. Counsel for the assessee, referring to assessment order submitted that the assessee has filed a letter from the partnership firm to prove that firm has authorized the assessee to collect money on behalf of the firm. The ld. Counsel for the assessee, further submitted that the assessee claims to have received agricultural income from family owned properties. The AO, ignored all evidences and made additions towards cash deposits. The ld. Counsel for the assessee, made an alternative submission and argued that if at all addition is required, then a reasonable amount of profit may be estimated on total cash deposits.

7. The ld. DR, on the other hand supporting the order of the ld. CIT(A) submitted that, the assessee could not file any evidences either before the AO or the CIT(A). Even before the Tribunal, the assessee did not file any evidence to prove his claim that source for cash deposits is amount received from debtors of partnership firm, except filing a letter from the firm stating that the firm has authorized the appellant to collect money. The assessee also could not able to file any evidence to prove claim of agricultural income. As regards, alternate plea of the assessee, it cannot be accepted because cash deposits found in the bank account of assessee is not turnover from the business, because the assessee is not engaged in any kind of business to ask for estimation of profit. Therefore, the DR submitted that there is no error in the order of the CIT(A) and their order should be upheld.

8. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The appellant has made cash deposits of Rs. 95,51,000/- in three bank accounts maintained at IDBI Bank Limited, Ongole and two accounts with Axis Bank Limited at Ongole. The assessee claims to have received amount from debtors of M/s. Golden Marine Harvest, the partnership firm in which the appellant is one of the partners, and for this purpose except filing an authorization from the firm for collection of money from debtors, the assessee could not file any other evidences like ledger copies of concerned sundry debtors account in the books of account of the partnership firm and relevant bank statement for having transferred said money to firms books of accounts. Therefore, we are of the considered view that the claim of the assessee that source for cash deposits found in three bank accounts is out of amount received from debtors of partnership firm is unsubstantiated and thus, we reject argument of the assessee.

9. In so far as, claim of accumulated agricultural incomefrom family owned agricultural land, the assessee could not file any evidence including details of land holding and amount of agricultural income earned year on year, except making an oral statement that his family members owned 9 acres of agricultural land at Musunur and Pedaparimi Villages, Pragasam District, and generated income about Rs. 10 lakhs per annum. In absence of any evidences like details of land holding, type of crop grown and amount of agricultural income generated, it is difficult to accept the assessee’s explanation that source for cash deposits is accumulated agricultural income from family members and thus, we reject arguments of the assessee on this ground also.

10. In so far as alternate argument of the assessee for estimation of reasonable amount of profit on cash deposits, we find that, first of all the assessee could not explain nature and source for cash deposits found in the bank account. Further, in order to consider estimation of profit on cash deposits, the assessee should atleast prove that either he is in some business and source for cash deposits in bank is out of unaccounted receipts from said business. In this case, as per the details available on record, the assessee is deriving income from share of profit from the firm, interest on capital and remuneration. Except this, he was not engaged in any kind of business activity in the impugned assessment year. Therefore, the alternate argument of the assessee for estimation of profit cannot be accepted.

11. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that the assessee could not satisfactorily explain source for cash deposits found in three bank accounts with necessary evidences. The ld. CIT(A), after considering relevant submissions has rightly sustained additions made towards cash deposits as unexplained money u/s. 69 of the Act. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the assessee.

12. In the result, appeal filed by the assessee is dismissed.

Order pronounced in the court on 12th April, 2023 at Chennai.

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